Regulatory News Announcement

com:20090206:RnsF9221M
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RNS Number : 9221M  
  
Potential Finance Group PLC  
  
06 February 2009  
  
Potential Finance Group plc  
  
Update on Financial Position  
  
The Board of Potential Finance Group plc (the "Company" or "Potential") is today 
providing an update on the Company's financial position.  
  
On 24 November 2008, the Board requested that trading in the Company's ordinary 
shares be suspended.    
  
By way of background, in the interim results for the six months ended 31 March 
2008, released on 24 June 2008, the Board stated that progress at Potential 
Vehicle Hire ("PVH") and Potential Asset Finance ("PAF"), the Group's two 
operating subsidiaries, had been encouraging during the early part of 2008, 
albeit that both were operating in unpredictable market places.  
  
During the summer of 2008, the Board continued to review the development of PAF 
and particularly PVH in light of the Group's available resources and the ongoing 
situation regarding Potential Finance Limited's ("PFL") one remaining defaulting 
debtor (arising from its ceased factoring activities). In 2004, PFL was provided 
with security over land intended for commercial development, as a possible means 
of recovering some or all of the monies owed. Due to the complexities 
surrounding the development, not least in relation to planning matters, progress 
on that recovery has been, as previously disclosed, slower than anticipated.    
  
With no resolution to this issue, in August 2008 the Board commenced discussions 
to sell PAF and thus provide additional finance for the continued expansion of 
PVH. The Board subsequently negotiated and had agreed terms for the disposal of 
substantially all of the business and certain assets of PAF. It was expected 
that this disposal would be concluded during the final quarter of 2008  
  
Unfortunately, the proposed purchaser of PAF sought to alter significantly the 
terms of the disposal immediately prior to completion, reflecting the change in 
the broader economic climate.   
  
At the end of October 2008, the Board decided to explore the possible sale of 
PVH in light of the uncertainty as to a successful conclusion of the disposal of 
PAF. A potential purchaser was identified and discussions commenced regarding 
the terms of the disposal of PVH.  
  
During November 2008, however, it became evident that the general economic 
crisis was having a severe and sustained negative impact on the second hand 
values of cars and vans in particular. In the Board's opinion it is likely that 
the rapid and previously unexpected deterioration in the motor vehicle markets 
led to the proposed PVH purchaser withdrawing its offer on the morning of 24 
November.   
  
It was the cessation of discussions regarding PVH that led to the Board's 
request to suspend trading in the Company's ordinary shares.  
  
In order to safeguard their positions, the 5 providers of finance lending to PAF 
exercised their rights to take over the HP and lease agreements they had funded, 
leaving PAF with a very few unencumbered accounts, although a management 
agreement was negotiated to assist with the collect out of the portfolio. It has 
since become evident that without income from its core portfolio, PAF is no 
longer a viable business and accordingly proceedings have begun to place the 
company into liquidation.  
  
The Board was, and has remained, in close contact with the 12 funders of PVH. 
Since late November, the Board has worked closely with these banks, endeavouring 
to secure the best possible outcome for them, as the principal creditors of PVH. 
Following discussion with PVH's funders, administrators have been appointed and 
the management team is looking to establish a viable plan to move the business 
forward, with the support of the banks.  
  
Turning to PFL, the Board is in discussions to dispose of its interest in the 
commercial property development referred to above, but is unable to assess a 
likely timescale for any transaction.  
  
06 February 2009  
  
Enquiries:   
  
Potential Finance Group plc    
  
Colin Swanston  
  
Managing Director  
  
colin.swanston@potentialfinance.com  
  
Vivien Ware  
  
Finance Director   
  
vivien.ware@potentialfinance.com  
  
Charles Stanley Securities  
  
(Nominated Adviser)  
  
Philip Davies       020 7149 6000  
  
 
This information is provided by RNS  
  
The company news service from the London Stock Exchange  
  
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